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“To be successful as a chief executive officer, you have to know how to run an enterprise. You have to be able to hire and surround yourself with the best talent you can — and you have to be capable of quickly dismissing people if you make a mistake. It’s important when speaking with investors, that you should be straight and honest — be blunt. Tell your investors what’s on your mind and what you will do, and then deliver on your promises.” This is James Sapirstein’s advice on being a successful CEO in a small biopharmaceutical company — which is something he never actually planned on doing. “I never thought about becoming a CEO,” he says. “I’m a pharmacist with an MBA. I’m very operationally focused. …I’ve always been focused on doing the best job I could. I figured that any benefits that come along with doing a great job would take care of themselves. My goal has always been to bring products to market that will improve patients’ lives.” For Mr. Sapirstein, that has certainly been the case. A little more than six months ago, he became the CEO and a director of ContraVir Pharmaceuticals, Inc. The company is focused on the development of antiviral technologies and, specifically, the clinical development of FV-100 to treat shingles patients. ContraVir is not Mr. Sapirstein’s first experience as CEO. Often described as a start-up and turnaround specialist, he has spent more than 30 years in the pharmaceutical and biotechnology industry, serving in leadership roles across the spectrum from start-ups to some of the largest biopharmaceutical companies in the world. Before taking the helm at ContraVir, Mr. Sapirstein served as the CEO of two smaller enterprises — one privately held (Tobira) and one publicly traded (Alliqua). In an interview with Ashton Tweed, Mr. Saperstein shared some of his experiences from his new position, and offered his insight on the differences, highlights, and daily challenges of leading a smaller, publicly traded enterprise like ContraVir.
I’ve been CEO of both public and private enterprises before ContraVir. By the way, I choose the word enterprise deliberately because, like ContraVir, these were not fully integrated pharmaceutical companies. They were smaller, project-based enterprises that had hopes of getting larger. I’ve worked in a wide range of environments, from global pharmaceutical companies to tiny, just-past-start-up-stage companies, and I really enjoy working with smaller enterprises. As CEO or part of the management team at one of these companies (whether public or private), you’re part of a very small group of decision makers. Every one of you has the responsibility to have an informed opinion and to get involved in decisions that have a lot of impact.
Being at a company like ContraVir means you’re also part of a small group of like-minded people — I would say 5 percent of folks in the industry (whether in the financial, research or clinical functions) — who want to have all of that responsibility and accountability on their shoulders. People who are willing to be creative and innovative, and who want the risk of working in a smaller enterprise (many have equity stakes in their companies) and the reward of accomplishing things that have a significant impact on health and patient care. In my mind at least, if you’ve made it to CEO of a company like ContraVir, you already know — or should already know — most of what you need to do the job successfully. You should have been successful running a number of projects or enterprises — although it doesn’t really matter what kind. I’ve overseen or been part of 23 drug launches — six global launches — and I’ve spent some time on Wall Street, with venture capital firms. The two main things I needed to learn in the transition from leading a private company to leading a public company were: (1) how to relate to and manage our relationship with the investor community, and how to (2) work with a different type of board of directors.
Most private companies — especially the smaller enterprises — are majority-owned by venture capital or private equity firms. Those firms choose most of your board, and these directors enjoy a lot of interaction with and influence over your operational decisions. While they often have deep knowledge of science or finance, your directors may not fully understand the management aspects of running the biopharmaceutical enterprise. Their focus is also aligned with the VC firm’s goal: to drive the company to a profitable exit, whether through a merger, an acquisition, or an initial pubic offering. As CEO of a public company, you interact very differently with your board, which is generally made up of independent directors. You have a very expansive shareholder base and you (and your directors) answer to all of those shareholders. And, as CEO of an enterprise such as ContraVir, I’m front and center in investor relations. But those shareholders are not going to tell me how best to run the company. Just the opposite. They are betting on me as CEO; they are investing in my proven track record. And as CEO, you get more of an opportunity to guide the company — and to bring in other directors to help you guide the company.
I’ve had success in fundraising for both kinds of entities. I think I’m good at it, but I don’t really enjoy it; in part because it does come with a lot of rejection. Fundraising is a little like dating on a massive scale — you have to develop a good story, tell it, and hope that you find chemistry and connection. For private companies, the challenge is to make the connection with a good venture capital or private equity firm. You face massive competition for the dollars. VC firms often have hard screens in place that you have to get past to reach the decision makers, so you can get kicked out of the running easily. But once you’ve found a good investor, like Domain Associates (the one I used to work with), funding becomes a little less difficult. If your VC firm is good at what they do, they will support you, make introductions, and open doors for you. But unless you have a super story and a super connection, it’s hard to raise money. I think there is less pressure on the public side. Raising money is easier and less political — although, like dating, you might end up kissing a lot of people along the way. You do roadshows, you talk to as many people as possible, and you spread your message as widely as you can. The terms you have to agree to are not really that onerous, and there is more that you can do once you have some money. Of course, you do have to deal with the volatility of the market, which you don’t have on the private side. If there is a large correction in the stock market, that can affect what you can do with your capital and how you run your operations. How you strategize your fundraising is a little different too. On the public side you plan out your capital over time, say for four to five years, once you do your initial fundraising. That’s not the case on the private side, where the funding plan is based on an inflection point (a significant event in the company’s progress, like the end of the Phase II trial, for example), because the eventual goal is a profitable exit.
SEC reporting does have an impact on the daily operations of all public companies, and I think the impact is greater on smaller enterprises such as ContraVir. Reporting is a costly and time-consuming process. Our annual 10K takes months to prepare. It must be absolutely accurate, so it requires review and rewriting. It’s also a significant expense. As a public company, our financials must be audited yearly. So we can spend tens of thousands of dollars, or more, on our reporting. A private company might choose to do an audit every couple of years and spend $15,000 or less. In addition, we have to file a report with the SEC for any major event that is material to the company. One challenge of running a smaller public company is that we have the same reporting responsibilities that a larger company has — Sarbanes-Oxley does not discriminate based on size. But we have fewer resources to get the job done. Larger companies have internal resources that they can devote to their reporting functions — we don’t. We have to outsource it, and it’s an expense that has a greater impact overall on our smaller budget. All that said, the reporting requirements have less of a day-to-day impact on me as CEO. They impact the CFO more on a daily basis. At the end of the day, I’m responsible for running the company, for trying to get — and keep — everyone on the same page, for communicating with the board of directors and my investor community.
I think each kind of entity has its pros and cons. Private companies have the advantage of minimal reporting requirements and the significant expenses related to them. In general, private companies are less expensive to run, and you have a greater percentage of your capital to devote to product development. As CEO of a smaller private company, your focus is, in part, on your relationship with your VC firms and your board, and the goal of operating your company is to increase the chance of a profitable exit for those investors. For public companies, the reporting requirements make it more difficult — and more costly — to run the enterprise. But you do have the potential for a lot more access to capital. Of course, Wall Street can be more punishing to a company than VC firms, but if you are a performer, with good strategic vision, you will be okay.
Ashton Tweed would like to thank James E. Sapirstein for this interview. If your company needs help from members of the Ashton Tweed Life Sciences Executive Talent Bank, we can supply that assistance either on an interim or a permanent basis. Additionally, if you are among the many life sciences professionals affected by the changes in the industry, Ashton Tweed can help you find the right placement opportunity — from product discovery through commercialization at leading life sciences companies — including interim executive positions and full-time placements. In either case, please email Ashton Tweed or call us at 610-725-0290. Ashton Tweed is pleased to continue to present insightful articles of interest to the industry.